SNEHAL CHANDUBHAI PATEL,SOLA AHMEDABAD vs. DCIT CIRCLE 2(1)(1), VADODARA

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ITA 2561/AHD/2026Status: DisposedITAT Ahmedabad28 October 2026AY 2020-217 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal. Regarding the validity of reopening under Section 147, the Tribunal found that the assessment was reopened based on information from the Investigation Wing concerning a search in the Swati Group. The Assessing Officer alleged accommodation entries against cash payments. The assessee provided documentary evidence, including loan confirmations, bank statements, and income-tax return acknowledgements of lenders, to support the claim of genuine unsecured loans received and repaid through banking channels. The Tribunal noted that the AO was required to establish accommodation entries with reliable corroborative material, which was lacking. The documentary evidence presented by the assessee supported their explanation of genuine unsecured loans. The Tribunal also found that the amounts were repaid even before the date of the search that led to the reopening. Consequently, the addition under Section 69A was not sustainable as the statutory conditions were not met. The grounds raised by the assessee on this issue were allowed, leading to the deletion of the addition. The Tribunal did not expressly leave any issue undecided.

What were the facts?

The assessee, Snehal Chandubhai Patel, filed an appeal against the order of the CIT(A) dated 12.05.2026 for Assessment Year 2020-21. The assessment was reopened under Section 147 of the Income Tax Act, 1961, based on information from an investigation wing regarding a search in the Swati Group. The Assessing Officer alleged that the assessee obtained accommodation entries totaling ₹32,00,000 from S. Kumar Corporation and Khodiyar Enterprise against cash payments. The CIT(A) upheld the reopening and the addition. The assessee contended that these were genuine unsecured loans, duly repaid through banking channels and recorded in books, supported by lender confirmations and bank statements. The assessee also argued that the reopening was based on borrowed satisfaction and that an opportunity for cross-examination of a third-party witness was denied.

What were the issues?

1. Whether the reopening of assessment under Section 147 of the Income Tax Act, 1961, pursuant to the notice issued under Section 148, is valid, considering the assessee's contention that it was based on unverified third-party information and borrowed satisfaction without independent application of mind by the Assessing Officer. 2. Whether the addition of ₹32,00,000 under Section 69A of the Income Tax Act, 1961, treating genuine business loans as unexplained money, is justified, given the assessee's submission that these were unsecured loans received and repaid through banking channels, supported by documentary evidence, and that the conditions for invoking Section 69A were not met. Assessee's Arguments: - The reopening under Section 147 is invalid as it relies on unverified third-party information without independent application of mind by the AO. There was no incriminating material linking the assessee to the Swati Group search or accommodation entries. - The amount of ₹32,00,000 represents genuine unsecured loans from M/s. S. Kumar Corporation and M/s. Khodiyar Enterprise, which were duly repaid with interest through banking channels and reflected in the books of account. The lenders' identity, creditworthiness, and transaction genuineness were established. - The addition was based solely on a third-party statement (Mr. Prakash Ambalal Prajapati) without any independent corroboration or evidence linking the assessee. The assessee's name did not appear in the statement. - The assessee was denied the opportunity to cross-examine Mr. Prakash Ambalal Prajapati, violating principles of natural justice. - Section 69A was wrongly invoked as the transactions were duly recorded unsecured loans, not unaccounted money found in possession. Revenue's Arguments: - The judgment records no specific arguments for the revenue on these grounds.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 69A,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

For Appellant: Shri Devesh Sharma, AR
For Respondent: Shri Amit Pratap Singh Sr. DR
Hearing: 13.10.2026Pronounced: 28.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT And SHRI TAPAS RAM MISRA, JUDICIAL MEMBER ITA No. 2561/AHD/2026 (Assessment Year: 2020-21)

Snehal Chandubhai Patel, Vs. The Deputy Commissioner 314, 315, Vraj Valencia, of Income Tax, Behind Mahindra Show Circle 2(1)(1), Room, Ahmedabad. S.G Highway, Sola, Ahmedabad-380060. [PAN : ACTPP7455 P] (Appellant) .. (Respondent) Appellant represented by : Shri Devesh Sharma, AR Respondent represented by: Shri Amit Pratap Singh Sr. DR Date of Hearing 13.10.2026 Date of Pronouncement 28.10.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal has been filed by the assessee against the order dated 12.05.2026 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the ‘Ld. CIT(A)’], under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2020-21.

ITA No.2561/AHD/2026, AY-2020-21 Snehal Chandubhai Patel - 2–

2.

The assessee has raised the following grounds of appeal: 1. CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 148 OF THE ACT AND PASSING THE ORDER U/S. 147 OF THE ACT 1. The Ld. CIT(A) has erred both in law and on facts by upholding the action of the Ld. AO in reopening the case of the appellant under Section 147 of the Income Tax Act, 1961 pursuant to the issuance of the notice under Section 148 of the Act dated 26.03.2024. 2. 2. The Ld. CIT(A) also failed to appreciate the fact that when there was no incriminating evidence brought on record by the Ld. AO then what was the reason on the basis of which Ld. AO drew satisfaction against the appellant. 3. The Ld. CIT(A) has erred in law and on facts in upholding the reopening under Section 147, as the same is founded solely on unverified third-party information without any independent application of mind or investigation by the Ld. AO. No seized or incriminating material was found from the search party's premises, nor is there any material linking the appellant to the search in the Swati Group, and the Ld. AO has not brought on record any cogent evidence, seized material, or statement of any key person of the Swati Group implicating the appellant in accommodation entry transactions. The reassessment notice under Section 148 is therefore vitiated by borrowed satisfaction. II. Addition of Rs. 32,00,000/- u/s. 69A treating genuine "business loans" as unexplained money 1. The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 32,00,000/- on account of alleged unexplained money Under Section 69A of the Income Tax Act 1961 as made by the Ld. AO. The Ld. CIT(A) incorrectly held that the appellant failed to furnish any satisfactory reply or any documentary evidence. 2. The Ld. CIT(A) has erred in law and on facts in not appreciating that the appellant had taken an unsecured loan of Rs. 20,00,000 from M/s. S. Kumar Corporation during the financial year relevant to A.Y. 2020-21, which was duly repaid by the appellant along with the principal amount and interest, i.e., Rs. 20,00,000+ Rs. 1,29,534 (interest net of TDS), on 16.03.2020. Further, the appellant had also taken an unsecured loan of Rs. 12,00,000 from M/s. Khodiyar Enterprise in FY 2018-19 and the same was repaid by the appellant in FY 2019-20 with interest aggregating to Rs. 14,58,845, i.e., principal

ITA No.2561/AHD/2026, AY-2020-21 Snehal Chandubhai Patel - 3– amount of Rs. 12,00,000 and interest of Rs. 2,58,845/- (Net of TDS) and TDS has also been deducted and deposited while making the payment. 3. The Ld. CIT(A) has erred in law and on facts in not appreciating that the unsecured loan received during the year under consideration was by account payee 3. The Ld. CIT(A) has erred in law and on facts in not appreciating that the cheque through regular banking channel and duly reflected in the bank account of the appellant as well as in the books of accounts of the appellant which were placed before the Ld. AO during the course of assessment proceedings. The Ld. CIT(A). despite the existence of documentary evidence establishing the identity of the lenders, their creditworthiness, and the genuineness of the transactions (including repayment with interest through banking channels), failed to appreciate that these loans are genuine and, therefore, no addition under Section 69A of the Income-Tax Act was warranted. 4. The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 32,00,000/- based solely on the statement of a third party, Mr. Prakash Ambalal Prajapati, recorded during the search proceedings in the case of Swati Group, with whom the appellant has no connection. No incriminating material or evidence linking the appellant to the alleged transaction was brought on record, and the name of the appellant does not appear in the said statement. The addition is therefore unjustified and liable to be deleted. 5. The Ld. CIT(A) has also failed to appreciate that no opportunity of cross- examination was afforded to the appellant in respect of Mr. Prakash Ambalal Prajapati, despite a specific request made by the appellant during the course of the assessment proceedings. The impugned addition has been made by relying upon statements/materials behind the back of the appellant, which is contrary to the settled principles of natural justice and the judicial pronouncements of the Hon'ble Supreme Court and various Hon'ble High Courts. Accordingly, the addition deserves to be deleted. 6. The Ld. CIT(A) erred in law and on facts in upholding the addition under section 69A, as the said provision applies only where unaccounted money or valuable articles are found in the possession of the assessee and no satisfactory explanation is offered. In the present case, the transaction relates to a duly recorded unsecured loan reflected in the books of account and supported through banking channels; therefore, section 69A was wrongly invoked. 7. The Ld. CIT(A) has erred in failing to duly consider and appreciate the judicial precedents relied upon by the appellant, which directly support the appellant’s contentions and have a material bearing on the issues under appeal.

ITA No.2561/AHD/2026, AY-2020-21 Snehal Chandubhai Patel - 4– The appellant reserves his right to add, amend, alter or modify any of the grounds stated hereinabove either before at the time of hearing.

3.

The brief facts of the case are that the assessee is an individual whose assessment for Assessment Year 2020-21 was reopened by issuing notice under Section 148 of the Income-tax Act, 1961, dated 26.03.2024. The reopening was based on information received from the Deputy Director of Income-tax (Investigation), Unit-1(1), Ahmedabad, in connection with the search conducted in the Swati Group on 21.09.2023. The Assessing Officer alleged that the assessee had obtained accommodation entries aggregating to ₹32,00,000 from S. Kumar Corporation and Khodiyar Enterprise.

Addition of ₹32,00,000 under Section 69A of the Act

3.1. During the reassessment proceedings, the Assessing Officer made an addition of ₹32,00,000 under Section 69A of the Act, treating the amount as unexplained money allegedly received through accommodation entries against cash payments. The assessee contended that the transactions represented genuine unsecured loans received and repaid through banking channels and duly recorded in the books of account. The assessee submitted that the loans were supported by confirmations, bank statements and income-tax return acknowledgements of the respective lenders.

3.2. The assessee further contended that the reopening was based on third-party information without independent application of mind by the Assessing Officer. It was also submitted that no specific incriminating material establishing the assessee's involvement in the alleged

ITA No.2561/AHD/2026, AY-2020-21 Snehal Chandubhai Patel - 5– accommodation entries had been brought on record and that no opportunity to cross-examine Shri Prakash Ambalal Prajapati had been provided, despite a specific request.

4.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) [CIT(A)], who upheld the reopening of assessment and the addition of ₹32,00,000 under Section 69A of the Act.

5.

Aggrieved by the order of the learned CIT(A), the assessee has preferred the present appeal before the Tribunal.

6.

The learned counsel for the assessee submitted that the reassessment proceedings were invalid as they were initiated on the basis of information received from the Investigation Wing without independent application of mind or specific evidence linking the assessee with the alleged accommodation entries. It was further submitted that the amount of ₹32,00,000 represented genuine unsecured loans, supported by documentary evidence and banking transactions. The learned counsel also objected to the reliance on third- party statements without providing an opportunity for cross- examination. Accordingly, the learned counsel prayed that the reassessment proceedings be quashed and the addition be deleted.

7.

We have heard the rival submissions and perused the material available on record. The assessment was reopened by issuing notice under Section 148 of the Act dated 26.03.2024, based on information

ITA No.2561/AHD/2026, AY-2020-21 Snehal Chandubhai Patel - 6– received from the Investigation Wing in connection with the search conducted in the Swati Group.

7.1 The Assessing Officer made the addition on the allegation that the assessee had obtained accommodation entries from S. Kumar Corporation and Khodiyar Enterprise against cash payments. The assessee submitted that the transactions represented genuine unsecured loans received and repaid through banking channels. In respect of S. Kumar Corporation, the assessee stated that a loan of ₹20,00,000 was received on 16.09.2019 and repaid on 16.03.2020, along with interest. The assessee relied upon the lender's confirmation, bank statement and income-tax return acknowledgement.

7.2 In respect of Khodiyar Enterprise, the assessee submitted that the loan had been received in an earlier assessment year and that the outstanding amount, along with interest, was repaid during the year under consideration. The assessee has submitted bank statement showing the details of payment along with confirmation. The assessee relied upon the confirmation, bank statements and income-tax return acknowledgement of the lender.

7.3 We find that the loan confirmations, bank statements and other supporting documents are relevant evidence for examining the genuineness of the transactions. The Assessing Officer was required to establish, through reliable and corroborative material, that the transactions represented accommodation entries obtained against cash payments. In the facts of the present case, the addition is not supported

ITA No.2561/AHD/2026, AY-2020-21 Snehal Chandubhai Patel - 7– by sufficient corroborative evidence establishing that the assessee paid cash in exchange for the alleged accommodation entries. The documentary evidence relied upon by the assessee supports the explanation that the transactions represented unsecured loans received and repaid through banking channels. The amounts have been repaid even before the date of search based on which the case has been reopned. We further find that the applicability of Section 69A must be examined with reference to the specific statutory conditions prescribed therein. In the circumstances of the present case, the addition made under the said provision is not sustainable. The grounds raised by the assessee on this issue are allowed.

8.

In the result, the appeal of the assessee is allowed.

The order pronounced in the open Court on 28.10.2026.

Sd/- Sd/- Sd/- (TAPAS RAM MISRA) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT (True Copy)) Ahmedabad; Dated 28.10.2026 JEETEND Digitally signed by JEETENDRA DEVENDRABHAI MV UPADHYAY RA DN: c=IN, o=PERSONAL, आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : title=6087, 2.5.4.20=7e5568a89b633f17 DEVENDR 1. अपीलाथ�/ The Appellant 4b28a80f5e63c638da40b73 13fb47ebaefda841cf59d170 2. ��थ�/ The Respondent. 3, postalCode=380059, ABHAI st=Gujarat, 3. संबंिधतआयकरआयु�/ Concerned CIT serialNumber=816dc56e896 211a1a21ccc4abc94ddc944 4. आयकरआयु�(अपील) /The CIT(A)- UPADHY 58f4a1b37be8e1854e93992 95106d4, cn=JEETENDRA 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad DEVENDRABHAI UPADHYAY AY Date: 2026.10.30 10:14:17 6. गाड�फाईल /Guard file. +05'30' आदेशानुसार/ BY ORDER, True Copy सहायकपंजीकार (Dy./Asstt. Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad

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